Bankruptcy Over Unaffordable Coverage – Story
I am 50 years old and have never had health insurance, I always pay out of pocket in FULL for every doctors visit, every ER visit and have always had a reserve of $25,000 dollars saved up through small monthly contributions to draw on in case of emergencies. This is how I figured all American’s should be, responsible. It is NOBODY else’s job to provide you with anything…It took me over 20 years to get this little healthcare only nest egg setup. I have ALWAYS paid my medical bills off, never once have I not.
I make well over the federal poverty level, thus I qualify for NO government help at all. I am a self employed truck driver, running my own small business.
I pay a lot in taxes as it is, including things such as both sides of the social security tax. All the businesses expenses are a lot too, and depending on business needs my income can fluxuate. If the truck needs a lot of work one month it could lower my income for that year a lot while I’m not driving and its in the shop, sometimes it can happen multiple times a year. Add to the mix that its usually thousands of dollars for the work too each time. I’ve had years where I bring home a 100k and years where I bring home far more than that. It isn’t like a steady job where your income stays the same.
It also depends on the loads available at the time. Sometimes loads pay a lot and sometimes you barely break even and sometimes you even lose money on one. If you wait around for a good load you might be waiting for awhile making nothing. Anyone who knows the trucking business knows sometimes you have to move to another location to get a better load and you might not make anything getting there.
I looked into getting health insurance that I don’t really need and the cheapest plan I could get with a high deductible is $900 dollars a month. I signed up for it to avoid paying the increased taxes that the ACA includes.
Problem is now, it is draining my healthcare savings reserve. I’m using it faster than I was contributing to it before. I had hoped it would be cheaper. Even though I make a lot of money I am also heavily in debt from an ex wife, alimony. Divorce is an expensive business, also business expenses still being paid off. Basically lots and lots of loans, so while my income makes people unsympathetic because they think if I made that much I’d have no problems, do keep in mind my debts match my income as it is and I was able to keep a float hoping that in 5 years things would be better as debt got paid off. If you think 100,000+ per year is a lot of money imagine having a debt load quite a bit higher than that.
Lots of people have been in situations where adding even one my bill would break the camels back for a few years while things got paid off, but imagine being in that situation and now you have to add a whole new bill that the government REQUIRES. I could not have gotten a loan for another 900 a month but here I am basically having a forced loan/payment that I never would have been able to qualify for.
Being required to suddenly spend $900 dollars extra a month I do not have doesn’t miraculous make me suddenly have it. I have started the bankruptcy process because I can no longer pay all my debts after adding this new one.
Ironically I’ll likely lose my truck, my business and my income…within a year or two I’ll likely be a zero income person getting free healthcare. I have been self employed my whole life and wouldn’t know how to work for someone anyways. It is why I started my business in the first place. I do admit that I cannot work for anyone else, because soon as a boss says or does something stupid I tell them off. Although that really has nothing to do with the situation just explaining WHY I went off on my own to due my own thing. Now I do believe I’ve spent too many years self employed I’ll never be able to work for anyone again.
What am I to do? Bankrupcy just doesn’t let me file it on one loan/debt to reduce my debt load to offset the ACA. It has to go for all debts, all loans and all assets. I am currently looking at it to restructure things so I can keep going as is in life but I’ll tell you right now this is a direct result of the socialist program we call ACA. If the restructuring fails then I could lose it all. Not having that 900 dollar a month payment would have prevented all of this.
I can’t be the only one this is happening to, a lot of American’s max out their debt based on income. I was fine about 5 years ago, until this whole divorce thing messed me up. My ex took out a lot of loans, add attorney fees and it got me to where I am now. The ACA is the straw that broke this Camel’s back. Of course now my credit will be ruined and it won’t be back to good again until I’m close to 65.
What I don’t understand is how so many American’s can support corporate socialism. Insurance is just a corporate version of socialism when you break it down and look at it. It shouldn’t matter if the government is doing it or a business that benefits from a government requirement.
Definition of Socialism: a political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.
Everyone pays into it and everyone benefits, the rich pay more and the poor get a cheaper ride on the backs of the rich. It would actually in my opinion be better to get rid of the ACA and just increase the Medicare/Medicaid tax rate and put everyone on it that doesn’t have it through their work.
The ACA really should be tackling the expenses Doctors and especially hospitals charge to keep those prices down. Maybe it should be changed to require hospitals to show here is the cost of something and here is what we charge with a max profit level set on each item. So a Tylenol cannot be charged 80 dollars a pill anymore if 1 pill costs a buck they can only charge a few bucks for it. At least in my opinion the costs should be regulated like a Utility company and a review board needs to approve all price increases. I believe in the free market but if we are required to buy a product it is no longer the free market. That works great for optional services.
A few pointers here:
1. If coverage would cost more than 8% of your Modified Adjusted Gross Income you qualify for an exemption from having coverage (see form 8965).
2. As a self employed truck driver you can deduct 100% of your medical expenses.
3. If you do make less than 400% of the Federal Poverty Level after deductions you can claim the “Premium Tax Credit” (form 8962).
4. There is no way you should actually be claiming bankruptcy over the ACA, take a deep breath, check out the forms, and find a solution that works. With everything we know about the ACA we are struggling to create a scenario in our heads in which the ACA bankrupts an individual who makes too much money for tax credits? You most likely qualify for that exemption!
https://obamacarefacts.com/file-taxes-obamacare/ <--- This page has all the forms you need to take the above mentioned deductions and exemptions.
What would one do if they do not qualify for the exemption due to making too much and was loaded with debt to the point that even one more bill would do them in?
Is there a hardship exemption for that?
I have an accountant I met with, plus an attorney on my options both of them say the same thing. That I don’t qualify for government assistance nor any exemptions due to making too much in the last year. In fact even at $900 a month that is less than 8% of my income last year.
In any case here is what has happened to me, and you can use this for your public scenario.
1 person makes 150k a year (for 2014), well above the 400% poverty level. They make around $12,500 a month gross. After taxes, several small business loan payments, mortgage payment, credit card payments, alimony, all the normal cost of living expenses at home (utilities), etc… left with about $500 a month for food for or play money for one person to live on. (Yes all the bills do equal about 12k a month for payments.) Doable but not easy, now add a $900 dollar payment in for health insurance, one is now making $-400 a month.
At least for me, only scenario I can think of is to remove one of the bills to free up money.
I keep going knowing that in two years I’ll have $1700 more money free each month due to three separate loans being paid off in 2 years. The other loans are higher in amount for much longer.
After those loans are paid off adding a $900 dollar a month bill for insurance would be easy enough. Problem is how to make it from here to there.
This is why I’ve said the ACA could push me into bankruptcy, at least re-organization to get the creditors to be willing to accept a portion of the pay offs. I have to remove one bill somewhere but none of the creditors want to reduce payments or anything.
I do appreciate the response and your time. I have already discussed this problem with several people in person and nobody seems to have a solution.
That makes a lot of sense, debt is certainly a scenario in which $900 is unaffordable and one doesn’t qualify for cost assistance. Sorry that you have to deal with this. Thank you for sharing the details, that makes it easier to help. We will clarify a few things (for the benefit of others as well) and try to add some pointers in.
– The fee and cost assistance is based on household income (your MAGI and dependents AGI). So you want to make sure your looking at money you will claim after deductions. Cost assistance for this year is based on what you make this year, not last year.
NOTE: Keep in mind you can deduct alimony paid from your MAGI. If you withdraw from a 401k or IRA you can deduct the withdrawal fee too. You can also deduct some businesses losses (depending upon how your business is organized this may help). Also you can, as mentioned before, deduct health insurance premiums and other health related expenses. See a full list of what is deducted for MAGI here: https://obamacarefacts.com/modified-adjusted-gross-income-magi/
– There are exemptions for just about everything, but claiming and then owing a lot of money isn’t one of them. If they bills were health related you could write them off as medical deductions or claim an exemption for un-payable bills… but they aren’t medical related.
– You can consolidate your debt. As you said, re-organizing your debt frees up more capital now. Seems like if you make it through this hump you’ll be back to being in the black in two years. Seems worth holding out for.
– The plus about bankruptcy is that that filing for bankruptcy does trigger an exemption.
– Look for a cheaper plan. If you have any religious affiliation perhaps look into health sharing ministries.
– Simply owe the fee, then don’t pay the fee, then pay the IRS back with interest after you are out of debt. (not the most elegant way to go about things for sure… but the IRS doesn’t impose jail time, leans, or methods of collection beyond withholding refunds for not paying the fee.).
– Get a job with an employer who offers coverage. Perhaps a small employer willing to offer coverage to a part-time employee. Someone local may be willing to understand your situation and trade off wages for benefits.
– Let us think more on this, it’s a heck of a predicament… but there is always a solution out there. The fact that we are outside of open enrollment doesn’t make the solutions any easier, but there is always at least some sort of solution out there.
A correction for you law experts. If coverage will cost more than 8% of gross income (not modified) you will qualify for an exemption. Not to mention if someone is injured and show your bronze ACA card you will learn you have an insurance card but not covered for more than 60% of the medical bill.
Usually ending in bankruptcy if more than a minor injury.
You will qualify for an exemption if the lowest cost bronze plan would have cost more than 8% of your household income (MAGI plus dependents AGI).
affordable care act a joke! Just got our new premium bill in mail $3,100 for 3 months. 12,000. a year with kids in collage. This is not affordable in our world. Don’t know what we are going to do!
Makes me sick!
Hi, I am a high school student learning about the roots of health care. If you were getting health insurance, would you still eventually go bankrupt?
As long as healthcare is provided to someone with insurance and is done in-network the amount a person can spend in a calendar year is capped by what we call an “out-of-pocket maximum”. The ACA caps maximums to help prevent anyone from paying more than they can afford if they get sick. However, the unfortunate truth is that the 10%-ish of Americans still without coverage and those who have very little savings can still find themselves facing bankruptcy over medical bills. Consider what the maximum out-of-pocket costs are for in-network services in 2015.
In 2015, your out-of-pocket maximum can be no more than $6,600 for an individual plan and $13,200 for a family plan before marketplace subsidies. (Subsidies called “Cost Sharing Reduction Subsidies” can reduce this significantly as can getting higher premium plans).
The take away is the ACA should be all means help to reduce bankruptcy due to medical bills, but there is a way to go healthcare reform wise before it’s eliminated.
(Readers please feel free to answer this question in your own words).
Myself and 2 kids are on one plan right now and they have had 1 set of shots and no other medical visits in 2015. I have met my deductibles for a while which insurance says is over $8000 just for me. So how is the cap true?
Don’t want to lose my home please help me what do I do for help
If you are at risk of bankruptcy for any reason there is lots you can do. If it’s over health care you can talk to the provider you owe money to, many places will work with you. You can also do a basic search for “how to avoid bankruptcy”, lots of different answers but lots of similar advice. The worst thing you can do is panic, procrastinate, and start giving things back to the bank. If you would like to be more specific as to what you are talking about we can help.
You made one mistake in your line of thinking. Not everyone will benefit under this socialist health care reform. A third of the country will loose their lifestyle and could end up on welfare.
We are in the same position. Filed chapter 13 a few years ago and paid off bills in huge amounts each month. Then couldn’t work due to decline health so we changed to chapter 7. Can’t find reasonable coverage for under $1500 per month. You cannot have minimal coverage when chronically ill and disabled. Been way over $15,000.00 out of pocket last few years. It’s going to likely be two years before I receive disability pay and Medicare.
What does a hardworking person do when they have student loans and two kids in daycare because one parent isn’t well enough to work or be a caretaker?
2 people with advanced college degrees, that have/had well paying jobs, forced into bankruptcy as a result of medical care in the USA. Both of us working 60 hour weeks. One of us working for the State. There needs to be some kind of relief for people in the gap. Any suggestions?
Agreed. Having people file bankruptcy, and having hospitals write off bills, and having insurers jack up rates because “some won’t pay” is not a sustainable model.
First off on a personal level subsidies and HSAs and other tax advantaged options are the way to go. Also, if you think you’ll hit $15,000 or something brutal like that in out-of-pocket spending then you need a high premium plan with low cost sharing. The math adds up typically. If you don’t go that route you must shoot for a medium (technically high deductible) with an HSA. You should also price shot for drugs and services in-network.
The prices are the biggest issues, but most of those are generated by the insurance companies. Did you notice the difference in prices paying cash as opposed to insurance ? It’s like 3 times what you’d pay in cash ! Insurance companies are robbing the country blind.
Have you thought about being a lease driver for one of the major trucking companies? I’m a truck driver too, have leased with several companies. One of the best was Schneider, but I pulled flatbed for them . Made some really good money with them. Had to go and get married, lol, bummer. Miss the road! Don’t give up, keep on trucking,Schneider had great benefits and a fairly open run package. Home when you needed it .
I so admire this man for not buying into socialism and wanting to make it on his own. Hopefully he will qualify for the exemption, be able to pay his own way, and just be another example of how the ACA failed.
You just endorsed Bernie Sanders Single Payer Health care. Which makes loads of sense and would ultimately reduce your true costs, but freaks everyone out because it would be a “tax increase.”
You are right! I am diehard that people should have basics regardless of income…but the insurance world has brought many people to the brink of financial ruin.
I am not faulting Obama specifically. I am saying this was poorly researched as to how the tickle down would affect people. My sister is a good example. She has worked her whole life, been honest, paid her taxes. She earns about 36K per year before tax as a single person (and she cares for one adult with cognitive disabilities).
Her DTI is high (mostly due to things beyond her control) and so mandated insurance of 400 + per month is outlandish and is placing her into the poor house. She works full time!
She is trying to keep up the bills but might be forced to attempt a loan just to cover the yearly expense of insurance. That is if she can even get another loan based on her DTI. Her AGI is 34,971 and her MAGI is 2797.68 but her monthly expected insurance payment is 440.00. I find myself asking how that is realistic?
She feels that the cost should be closer to 230 to 250 a month and that would be tight but doable. But no she is locked into this 2016 enrollment for 440 a month. Down the road a few months she will have trouble making her rent. This is going to force bankruptcy to her door –the Chapter 7 kind. That is not what she wants she has maintained 700 plus in FICO….so people cannot assume she is financially irresponsible.
I am not sure how this is legal when it can actually hurt some folks. It was implemented with the intent of keeping people from chapter 7 (rationale)….but for some folks it will only lock them into that mess.
A possible solution is to not get the insurance, make sure you don’t get an refund and therefore avoid the penalty. This might not work since it is a strategy for employees who are young and really don’t even need this insurance. Good luck. How about you get your alimony reduced?
Same thing here 350$ a month for health ins. That has a 6350$ deductible. Went to emergency room 3000$ my insurance paid 50$ now with hospital payment and ins is 500$ a month. I didn’t sign up for this shit. FUCK THE OBAMA CARE STICK IT UP THIER SOCIALIST FUCKING ASS. COULDNT AFFORD HEALTH CARE BEFORE NOW ITS ONLY THE RICH AND NON WORKING BUMS THANKS DEMOCRATS
I agree with the last paragraph. The system will not work or be affordable unless the actual medical costs are controlled. In the case of Pharma, prices have escalated at an out of control rate for way too long. There is no way to provide a base large enough to make their prices affordable. Those industries must prove themselves responsible providing medications at reasonable rates or have their prices regulated. When an average citizen can no longer afford basic medical care without insurance, the costs have become to excessive. Like anything else, to bring costs down the overhead must be dealt with. Our representatives have been in the tank with Pharma for way too long, and it is time for them to loose their influence and represent the people at the bargaining table.